Air Taxi-Air Charter – What’s the Difference in Pricing?

The term “air taxi” refers to an aircraft service that provides transport to people in an on demand basis. That is you can take a flight in a private jet when you want to go rather than booking a trip that was previously scheduled. Air charter is a form of air taxi but a new class of aircraft and new business models are re-defining “air taxi” to mean something less expensive than traditional charter. The idea behind an air taxi system is that the aircraft operator will be able to reduce the number of empty flights that the airplane has to make.

Air Charter:

Let’s say you book a flight on a Cessna Citation S/II (CE-S550). This light jet might rent for an hourly rate anywhere from $1,500 to $3,100 depending on the age of the aircraft, amenities and operator qualifications. For our purposes we’ll assume a typical rate of $2,000 per hour. This price includes the costs associated with operating the aircraft such as pilot salary and fuel costs but does not include some extra charges that may add considerably to your expenses such as:

Taxes – generally 7.5% of the total price.

Repositioning fees – Let’s say you want to fly out of Santa Monica, California but the aircraft is located in San Diego. The aircraft operator would need to send the airplane empty to pick you up and then return it empty to San Diego after dropping you off in Santa Monica at the end of the trip. This repositioning adds expense to the operator’s bottom line and is generally added to your cost at a reduced hourly rate.

Overnight and waiting fees – Let’s say your trip is to fly from Santa Monica to Las Vegas returning on the same day. Your pilots would wait for you for several hours and you’d be charged an hourly rate for the pilots’ time. If your trip calls for an overnight stay you may be charged for the pilots’ hotel rooms and overnight parking fees for the aircraft. These charges will vary depending on local rates.

Daily minimum charge – Most aircraft operators have a two-hour minimum operation charge for charter aircraft. If you need to go on a flight that takes one hour each direction and you complete both legs of the trip in one day then you meet the minimum use requirement and you would only need to pay for the two hours you use the aircraft that day. If, on the other hand, your trip is scheduled to fly one hour on Friday and then return for the one hour trip on Saturday then you would likely be charged for two hours on Friday and two hours on Saturday for a total of four hours, even though the aircraft only flew for two hours total. This industry standard practice is in place for the “time is money” principle. Aircraft incur expense even when they are just sitting idle.

Air Taxi:

There are two distinct pricing structures in the air taxi model that might be used and each aircraft operator would make their own determination as to which they would employ, Entire Aircraft or Per Seat:

Entire Aircraft – Again we’ll use the Cessna Citation S/II for this example but the hourly rate will be higher than the air charter rate; let’s say about $2,500 per hour for this example but you won’t be charged for repositioning, overnight, waiting landing or other charges. It will be a simple per hour price for a pickup and drop-off. After you are dropped off the aircraft may take another client on a trip. Your return trip may be in the same aircraft or it may be in a different aircraft or even a different company. This sort of air taxi service may only be available between certain airports that have enough traffic to keep the aircraft gainfully employed.

Per Seat – The Citation S/II has 7 passenger seats available. If they make a flight with fewer than 7 passengers onboard the operator would lose money if they divide the fare by the number of seats. So they will fix their pricing in one of two ways:

1) Divide the entire price by the number of passengers actually onboard the aircraft for each flight. Let’s say you are traveling with two colleagues and there is another group of two that will travel on this flight with you for a total of five passengers. The price for a seat would be $2,500 / 5 = $500 per seat. If your group were the only ones on the airplane then the per-seat hourly rate would be: $2,500 / 3 = $833 per seat.

2) Divide the entire price by the average number of passengers the operator carries on each trip. Let’s say the operator has been flying the SMO to LAS route for some time and they have determined that they can routinely get an average of 2.9 passengers for each flight they make. If the operator uses this pricing strategy they would charge you $2,500 / 2.9 = $862 per seat per hour. This would be the same price regardless of the number in your party.

Per seat pricing would only be available between limited city pairs that have the volume of traffic to keep the aircraft filled with paying passengers. If you want to fly to an airport outside the per seat network of cities you would probably need to charter the entire aircraft as per seat pricing would not likely be available.

It’s all about efficiency:

The emerging air taxi business model brings more efficiency to the air charter model. Less waste will equate to reduced greenhouse gas emissions, more productivity and lower end costs. Air taxi is expected to become more available and less expensive as Very Light Jets (VLJs) are produced and made available for air charter and air taxi flights. These aircraft promise to provide services at 20% to 40% discounts from existing light jet aircraft such as the one in the example. As of this writing there have been about 100 VLJs produced and a handful of them have found their way into air taxi businesses along the east coast and Chicago area. But that’s another story.